2021 (8) TMI 181 - HC - Income Tax

Reopening of assessment u/s 147 - Writ questioning the validity of the order of disposal passed by the respondents, rejecting the objections filed by the writ petitioner on re-opening of assessment initiated under Section 147/148 - HELD THAT - This Court is of an opinion that Section 147, the conditions stipulated for re-opening of assessment as well as the scope of Section 133A are unambiguously portrays the powers of the authority to secure informations by conducting survey and such informations provided by way of an audit objections would be a cause for re-opening of assessment under Section 147/148 of the Act. Each provision under Chapter XIV procedure cannot be separated as far as the Income Tax Act is concerned. Each Section has got linkage with one another as far as the procedures to be followed by the authorities competent as well as the rights of an assessee to defend their case. A balancing procedures as contemplated, undoubtedly are to be followed scrupulously by the authorities. Under these circumstances, sources cannot be questioned by the assessee. The very purpose and object of the wider scope provided under Section 147 is to ensure that in the presence of contra materials made available to the AO, a re-opening of assessment is made and persons evaded tax are brought under the network. In the present case, the objections raised regarding the reasons were dealt with by the respondents. Further, the other issues regarding change of opinion is also considered - AO has spelt out certain reasons, which provided a cause for re-opening of assessment and such reasons are sufficient enough and, if the petitioner / assessee is not convinced, it is left open to him to defend the case during reassessment proceedings. In the present case, the Directives issued by the Hon'ble Supreme Court of India in the case of GKN Driveshafts (India) Ltd., Vs. Income Tax Officer and others 2002 (11) TMI 7 - SUPREME COURT was followed. The assessee also availed the opportunity and the reasons furnished as well as the objections submitted by the assessee were considered by the authorities. It is relevant to note that each and every objection filed by the petitioner was elaborately considered and all the grounds raised are also met with by the assessing authority relying on the principles laid down by the Constitutional Courts - Under these circumstances, this Court is of the considered opinion that the petitioner has to defend their case by participating in the process of reassessment.

Issues Involved:
1. Validity of re-opening of assessment under Section 147/148 of the Income Tax Act, 1961.
2. Assessment based on audit objections.
3. Application of mind by the assessing authority.
4. Charging of interest under Section 234B.
5. Compliance with the directives issued by the Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. Income Tax Officer.

Detailed Analysis:

1. Validity of Re-opening of Assessment:
The petitioner challenged the re-opening of the assessment initiated under Section 147/148 of the Income Tax Act, 1961. The petitioner argued that the original assessment was completed after considering all materials and books of accounts. The notice under Section 148 was issued based on audit objections without independent opinion or application of mind by the assessing authority, which is a prerequisite under Section 147. The court, however, observed that if the Assessing Officer "has reason to believe" that any income chargeable to tax has escaped assessment, it is sufficient to invoke Section 147. The court emphasized that the scope of re-opening within four years is broader than beyond four years, and the sources of information can be numerous, including audit objections.

2. Assessment Based on Audit Objections:
The petitioner contended that audit objections alone cannot be a ground for re-opening the assessment. The court clarified that whether it is an audit objection or any other material, if the Assessing Officer "has reason to believe," it is sufficient for re-opening the assessment. The court stated that the audit objections raised based on a survey conducted under Section 133A of the Act, which provided materials and evidence, are valid grounds for re-opening the assessment.

3. Application of Mind by the Assessing Authority:
The petitioner argued that there was no application of mind by the assessing authority as the audit objections were taken as the basis for re-assessment. The court noted that the reasons for re-opening were provided, and the objections raised by the petitioner were considered. The court held that the Assessing Officer had spelt out reasons sufficient for re-opening the assessment, and if the petitioner is not convinced, they can defend their case during reassessment proceedings.

4. Charging of Interest under Section 234B:
The petitioner argued that the interest chargeable under Section 234B could be addressed without invoking Section 147/148, as it does not fall under the category of income chargeable to tax escaping assessment. The court did not find merit in this argument, stating that the reasons provided for re-opening were valid and the petitioner could raise this issue during reassessment.

5. Compliance with Supreme Court Directives:
The court observed that the directives issued by the Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. Income Tax Officer were followed. The petitioner was given an opportunity to respond to the reasons for re-opening, and the objections were considered by the authorities. The court emphasized that each objection raised by the petitioner was elaborately considered, and the grounds were met with by the assessing authority.

Conclusion:
The court dismissed the writ petition, stating that the petitioner must defend their case by participating in the reassessment process. The court held that the re-opening of the assessment based on audit objections and the reasons provided by the assessing authority were valid. The petitioner was at liberty to present their case during the reassessment proceedings. The writ petition was dismissed with no costs, and the connected miscellaneous petition was closed.

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